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Crowding out the bookie

This article was taken from the December 2011 issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content bysubscribing online.

Jason Trost doesn't think you're a bad gambler -- he just thinks you're getting terrible odds. "If you're betting on a coin flip, you should get 50 per cent odds, but a bookmaker will sell it to you for 60 per cent," says Trost (above, right), CEO and cofounder (with Hunter Morris; above, left) of Smarkets. "Even with the best coin-flip strategy in the world, you're going to lose money. I want to make these markets smarter and more efficient. So, instead of selling a coin flip for 60 per cent, we'll sell it to you for 50.01 per cent."

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How do you make the market more efficient? By making it social.

Smarkets allows users to set their own odds on sports events: if other fans think you've mispriced the event, they bet on it. "Social is the future of the industry," says Trost, 30. "The motivation came from when I was a trader: traders talk all the time." He worked at Great Point Capital, Chicago, after graduating from Northwestern University. In 2010, he teamed up with Morris, who had been developing software for high-frequency city trading, to launch Smarkets in London. "In the US, the market's off-limits for now. So the UK is clearly the biggest legal gambling market in the world." The site now has 5,000 users, with £2 million waged every week, and delivers 1,500 price updates per second. "For the end user, we want to expose more data," says Trost. "When you're trading a stock, say, you get the ticker or print. The print gives you a very good feel for how things are flowing. That's one piece of information that Betfair doesn't give you."

Name: Jason Trost and Hunter Morris

Occupation: Founders, Smarkets

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Location: London

Need to know: They're socialising the way that odds are set and bets are placed